Loan Against Agricultural Land

What is a Loan Against Agricultural Land?

If a farmer has a piece of land in his/her name, that can be used as  collateral to obtain a loan from a bank or a financial institution. When a borrower pledges an agricultural land for money it is called as a ‘Loan Against Agricultural Land’ or ‘Agriculture Loan’.

Features of Loan on Agricultural Land

The main features of an agriculture loan are mentioned below:

1. Loan Against Agricultural Land is specially designed for people who cultivate crops like farmers, planters, or Horticulturists. It cannot be availed by a businessman or a professional.
2. Usually, the farmer does not have to furnish Income Tax Returns to apply for this type of loan.
3. It requires minimum documentation.
4. The loan tenure goes up to 20 years with many banks.
5. There are no hidden charges on Agriculture Loans.
6. The lender usually works out a flexible repayment plan considering the farmer's situation.
7. The turnaround time is fast and the banks are sensitive to the harvest season.
8. The borrower can use the funds for agricultural purposes like food processing, buy agricultural equipment, set up dairy units/fisheries/rice mills, or for micro-irrigation.
9. They can also use the funds to set up a greenhouse, cold storage, or a horticulture centre.
10. To buy agriculture insurance to protect from crop losses.
11. You can use the funds to buy livestock or cover your marketing and operating expenses.
    

Eligibility Criteria for Loan Against Agricultural Land

The eligibility criteria that must be met to obtain an agriculture loan are mentioned below:

1. Farmers, Dairy Owners, Horticulturists, and any Orchard owners are eligible to apply for an Agriculture Loan.
2. Most lenders prefer the age of the applicant to be between 24 and 65 years of age.. However, there are few banks who offer loans to applicants who are 18 years of age. The eligibility differs from one bank to another.
3. If the land is owned by two people, co-applicant is mandatory.
4. An agricultural land is pledged as collateral. The borrower should have clear titles to the land to be eligible to apply for a Loan Against Agricultural Land.
5. Usually, lenders prefer borrowers to have residence stability of 2 years.
6. Most banks offer loans based on the size of the land pledged. They usually mention the minimum acres of land a farmer should have to apply for a loan.

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Interest Rate for Loan Against Agricultural Land

The interest rate on agriculture loans differ from one bank to another. You will have to contact the bank directly to find out the exact interest rate that will be charged.

Union Bank- Loan for Agribusiness

Canara Bank Agriculture Loans

IDBI Bank Agri Loans

For Term Loans up to Rs.25 lakhs (To small and marginal farmers) -

1. Minimum rate of interest - BBR+0.50%
2. Average rate of interest - BBR+0.50%.

For Working Capital and Short Term Loans above Rs.25 lakh up to Rs.3 crore (To small and marginal farmers) -

1. Minimum- BBR+0.50%
2. Maximum-BBR+0.75%
3. Average-BBR+0.63%

For Term Loans above Rs.25 lakh up to Rs.3 crore (To small and marginal farmers) -

1. Minimum- BBR+1.0%
2. Maximum-BBR+1.25%
3. Average-BBR+1.3%

Documents Required to Apply for Loan Against Agricultural Land

The documents that must be submitted to avail a loan against agricultural land are mentioned below:

1. Duly-filled application form
2. One valid identity proof like your PAN card, Aadhaar Card, or Passport
3. One valid proof of residence like Aadhaar Card, Passport, or Utility Bills
4. Land documents like registration document, taxes paid, and utility bills
5. No due certificate from Co-operative Credit Society (If required)
6. Copy of the land sale agreement
7. Last six months bank statement (If required)
8. Passport size photograph of the applicant and co-applicant

Fees and Charges for Loan Against Agricultural Land

There are many fees and charges that will be charged on your Agri Loan. Some of the most popular ones are:

1. A Processing Fee of 0.50% of the loan amount or Rs.3,000 whichever is higher is usually charged. However, this charge differs from one bank to another. During the festive season, many banks waive the processing fees to encourage borrowers to take loans.
2. Prepayment Charges
3. Conversion Fees
4. Cheque Dishonor Charges
5. Property Insurance Charges
6. Incidental Charges
7. Statutory and Regulatory Charges
8. Foreclosure Charges
9. Late Payment Penalty
10. Stamp Duty
11. Legal Fees
12. Valuation of the Property Fees
13. Inspection Charges

If you are planning to pledge your agricultural land for money, compare various loans before you choose one. Talk to the bank directly for accurate information.

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